Our alternative to market madness

(5 April 2008)

Last week the Financial Times claimed that Socialist Worker had no answer to the economic crisis caused by capitalism. Chris Harman sets the record straight

The growing economic crisis in the US is causing even the most fervent supporters of capitalism to have their doubts in the neoliberal ideology they have used to justify the system for the past 30 years.

“I no longer believe in the market’s self-healing power,” said Josef Ackermann, chief executive of Deutsche Bank, the world’s ninth biggest bank, in a speech in Frankfurt two weeks ago.

A most remarkable spectacle is the anguished heart searching among the columnists of British capitalism’s own house newspaper, the Financial Times. This followed the spectacle of the US state breaking with pure market principles and forking out hundreds of billions of dollars to prevent a bank collapse.

Martin Wolff, long an ardent neoliberal, said of the day that happened, “Friday 14 March 2008: it was the day the dream of global free market capitalism died”.

Another anguished columnist is Michael Skapinker. He says that a sea change in ideas, as important as that which occurred 30 years ago, is taking place.

Then most apologists for capitalism abandoned “Keynesian” notions that state intervention was needed to make capitalism work. Instead they embraced what is now known as neoliberalism – the notion that state intervention in fact prevented free market capitalism from working properly.

Skapinker does, however, try to console his capitalist readers with one thing. “Trawling leftwing and far-left websites”, he claims, shows that “they clearly have not got a clue either” about what to do.

His “trawl” of Socialist Worker’s ideas was limited to drawing on one sentence from our website.

But if he had looked seriously at any of our publications he would have seen that we have long put forward a cogent argument about the alternative to the chaos of contemporary capitalism.

Contradiction

It starts from a very simple observation. The present capitalist system is based on a central contradiction. On the one hand it depends on networks that merge the labours of most of the world’s six billion people into what is in effect a global system of cooperation.

Just look at the clothes you are wearing. They are made from cotton or wool from one part of the world, carried by ships made from steel from somewhere else, woven in a third place, stitched in a fourth, transported using oil from a fifth, and so on. A thousand individual acts of labour are combined in even the simplest item.

On the other hand, the organisation of these networks is not based on cooperation, but on ruthless competition between rival highly privileged minorities who monopolise the means that are necessary for production – the tools, the machines, the oil fields, the modern communications systems, the land.

What motivates these minorities – the capitalists of one sort or another – is not the satisfaction of human need. It is the pressure to compete and keep ahead of other capitalists.

The key to keeping ahead in competition is making profit and then using the profit to invest in new means of keeping ahead.

Sometimes these investments do indeed produce things of use to the mass of people. But they are just as likely to be directed towards building a new supermarket next door to an existing one owned by a rival, spending money on rebranding old drugs rather than researching new ones, establishing a monopoly of cumbersome software to keep out better rival systems, invading countries to seize control of their oil or hoarding food that is short supply to force its price up.

Such a system necessarily leads to repeated crises, since the drive for profit leads rival capitalists to rush to pour money into any venture that seems profitable, even though the result of them all doing so is to force up prices of raw materials and to produce goods that the world’s workers cannot afford to buy because their wages have been held down to boost profits.

The socialist alternative to such a state of affairs is simple. It is to replace decision making on the basis of competition between rival groups of capitalists by a genuine democracy where the mass of people democratically decide what the economic priorities should be and work together to plan how to achieve these.

It is said that such planning cannot work because modern productive systems are too complex. Yet every major capitalist enterprise undertakes planning to fulfil its objectives.

Tesco does not rely on the local street market to restock its shelves. It plans years in advance to guarantee the supplies of the thousands of products available in every big store.

Planning

In the same way Nissan or General Motors try to plan in detail the production of the thousands of components that go into any one of their car models – even if the planning involves imposing their demands on smaller firms that supply them.

Those who do the planning, it should be added, are very, very rarely the owners of the giant corporations – rather they employ technical staff to do the job for them.

In the same way it is employees, not owners or directors, who carry out scientific research, develop new production techniques and make all of the advances to which the capitalist system then lays claim.

If planning and innovation are possible under the present system, they are just as possible under a system based upon meeting human need through democratic decision making, rather than competing in order to make profits to direct towards further competition.

Indeed, under such a system, planning would be easier. The planning that takes place in any capitalist corporation at the moment is always distorted by the impact of the planning taking place in rival corporations.

Nissan can spend billions on a new car only to find the market is already flooded with products from Volkswagen or Toyota. Tesco can lay out grandiose plans for the next half dozen years only to find that the crisis caused by blind competition in financial markets is cutting people’s ability to buy what it has to sell.

It was precisely such competition that led to such an economic disaster in the old Soviet Union. Without democratic decision making from below, its rulers’ goal was to subordinate everything to military competition with the western states, and in its last two decades with China as well. Internal planning turned into its opposite as it was subordinated to external competition.

Does this mean that socialists are committed to immediately abolishing all market mechanisms – as our opponents always put it, “nationalising every corner shop”?

Certainly not. What shapes the development of present day capitalist society is what happens in its giant corporations, not its myriad of small businesses.

Reshape

To reshape society in a socialist direction it is necessary to take control of those corporations and coordinate their investment decisions, subordinating them to the fulfilment of democratically decided priorities.

This in turn would determine the parameters within which market mechanisms would continue to function for a longer or shorter period in the less central parts of the economy.

This democracy would be very different to the “democracy” that exists today, which leaves real power in the hands of the corporations and where ordinary people have no say over the running of the economy.

A socialist society would involve the mass of people in democratic debate to plan production to meet human need.

What stands in the way of such an approach is not its lack of viability. It is that those who own and control the production of wealth today will do anything in their power to keep things that way.

They may switch, like the head of Deutsche Bank, from neoliberalism to a more state interventionist approach. But they will try to cling on to their own economic power to the end. Only massive struggles by those who suffer from their system can bring it to an end.

A final important point. Such struggles can begin in one country and, by transferring wealth from the rich to the rest of the population, achieve important positive advances.

But the international character of capitalist competition means that the only way to make a final escape from its grip is by developing struggles that spread from country to country.

Only then can the new democratically controlled productive networks have at their disposal all the resources needed to provide a better life for the bulk of humanity.